Phoebus Hotel Deals Costing More

January 12, 2005|By TERRY SCANLON, tscanlon@dailypress.com | 247-7821

HAMPTON — Taxpayers might end up paying more for the businesses than the city's staff projected, a councilwoman says.

City Councilwoman Angela Leary plans to go along with a deal today that would bring three hotels to Phoebus. But she's not happy with how City Manager George Wallace's staff has handled the transaction.

A proposed sales agreement that the City Council is expected to approve today almost included the wrong piece of land, Leary said.

And she's irritated that the city's staff low-balled the cost to taxpayers.

"I support the sale of the property. I support the project. I support the developer," Leary said. "But I need for the cost borne by the taxpayers that is associated with this property to be discussed openly."

The dispute underscores Leary's complaints about how the city has been conducting business and why she's been pushing for changes.

After just six months on the council, Leary has established herself as one of the groups most active members and one of the loudest critics of the city manager.

Less than a week after the council agreed on a vision for the city's future during a retreat that several council members hoped would put an end to the infighting that has plagued council, Leary plans to take her latest complaints public at today's council meeting.

"What I am looking for is a level of assurance and comfort with the information that is being given to me," she said. "I have not found that right level yet for me to make an informed decision. When I do find that level you will see fewer questions from me."

Developer Jay Barot, the president of JMD Enterprise, plans to buy 9.5 acres along Interstate 64 in Phoebus for $550,000 from the city and its partner, PD Inc., a wholly owned subsidiary of the Phoebus Improvement League. Among the founding members of that civic group was Hampton Mayor Ross A. Kearney II.

Barot said he plans to open five-story, limited-service hotels in 2006 and 2008, with a third hotel scheduled to open a year or two after that.

Earlier plans called for a restaurant, but Barot said he has decided there's not enough space for that.

In 1990, PD Inc. and the city formed a partnership and bought the land that gave the city control over the development, hoping that it would be prime real estate.

PD Inc. technically bought the property for $324,988, although the civic group never spent a dime. With the city's help, PD Inc. secured an "interest only" loan, meaning only interest payments are paid by the city for five years. The loan's principal would be paid when someone buys the land. In return, the civic league would share the profit after the resale.

When the land didn't sell, the property was refinanced in 1995. The loan was extended a second time by the city in 2000, and in 2002, the city agreed to pay off the loan.

In all, the city invested more than $812,000 into the property, mostly principal and interest on the loan.

The deal with Barot will easily make up for any losses sustained by the city, city officials say.

Each hotel would bring in about $375,000 a year in taxes, said the city's economic development director, Jimmy Eason.

Leary said she understands that it's a good deal for the city, but she's upset about how the city's staff has presented it to the council and public.

The description of the land involved in the deal, which was given preliminary approval by the council in June, identified the wrong piece of property. Plus, a staff analysis fails to mention that the city will lose money on this property.

The analysis done by staff said that the city and PD Inc. would split $181,500 in proceeds from the sale. Kearney said it's important that the city honors its agreement with Phoebus Improvement League.

Leary said the calculation ignores more than $443,000 of the city's investment in the property, primarily the $330,000 spent on interest for the loan.

"What I want," Leary said, "is for the taxpayers to see how much has been spent on this property and how we intend to distribute the proceeds from this property." *